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on Contract Theory and Applications |
| By: | Marta Troya-Martinez (New Economic School) |
| Abstract: | Trade credit plays a very important role in inter-firm transactions. Because formal contracts are often unavailable, it is granted within an ongoing relationship. We characterize the optimal self-enforcing contract, when the ability to repay is unknown to the supplier and the threat of trade suspension is used to discipline the buyer. The optimal contract resembles a debt contract: if the fixed repayment is met, the contract is renewed. Otherwise, the supplier demands the highest feasible repayment and suspends trade for some time. The length of the trade suspension is contingent on the repayment. We provide a novel explanation for why the quantity is undersupplied, even when a repayment is met. |
| Keywords: | Limited Enforcement, Trade Credit, Imperfect Monitoring, Debt Contract |
| JEL: | C73 D82 L14 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0240&r=cta |
| By: | Triossi, Matteo; Romero-Medina, Antonio |
| Abstract: | We study a class of sequential non-revelation mechanisms where hospitals make simultaneous take-it-or-leave-it offers to doctors that either accept or reject them. We show that the mechanisms in this class are equivalent. They (weakly) implement the set of stable allocations in subgame perfect equilibrium. When all preferences are substitutable, the set of equilibria of the mechanisms in the class forms a lattice. Our results reveal a first-mover advantage absent in the model without contracts. We apply our findings to centralize school admissions problems, and we show obtaining pairwise stable allocations is possible through the immediate acceptance mechanism. |
| Keywords: | ultimatum games; contracts; Many-to-many |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:24368&r=cta |